While micro and small enterprises (MSEs) are seeking deferment in the implementation of section 43B(H) of the Income Tax Act that directs buyers to make payment within 45 days to MSEs for delivery of goods and services, medium-scale industries have demanded that they be included under this section.
Medium-scale industries say that they have to make payments to their MSE suppliers in 45 days but they do not get timely payment from buyers.
The central government has made it compulsory for buyers to make payments to MSEs within 45 days with the inclusion of section 43B(H) in the Income Tax Act. If any firm fails to make the payment in the stipulated time the purchase amount will be included in the income for the buyer.
This created fear among traders especially in the textile sector as they have a payment cycle of around 120 days. As per the definition, a unit having investment in plant and machinery up to INR 50 crore and turnover up to INR 250 crore is considered a medium enterprise.
The medium-sized units are demanding they should be included as beneficiaries under section 43B(H).
Sachin Patel, former secretary, the Gujarat Chamber of Commerce and Industry (GCCI) said, “This is a good rule for timely payments for MSEs. However, this rule should be for all. The current situation does not provide a level playing field for medium units. They buy various raw materials from MSEs and they have to make payments in 45 days to MSEs. However, medium scale units will not get their payments in 45 days.”
The textile industry is affected the most by the new rule but medium-sized units in this sector are also demanding such a rule. P R Kankariya, director of a mid-sized textile processing company said, “The entire textile industry has a payment cycle of up to 120 days or more. In such a scenario, the new rule states that we make payment to our MSE suppliers in 45 days but we do not get our dues in the same duration so it can create working capital issues. In such a situation, the government should keep payment terms the same for all.”
